A business that wants to be successful in today’s economy will need to understand the resources that it uses, how they function in its business model, and how to make the most out of them. This guide will introduce business managers and owners to the concept of economic resources, discuss some of the challenges that they present, and lay out strategies that every business professional should understand for managing and evaluating resources. By studying business administration, managers and owners can set their companies and themselves up for success.
What Is a Resource?
In the context of business and economics, a resource is any factor that’s necessary to accomplish a goal or carry out an activity. In short, they are the components that a business needs in order to do business. Resources often include employees, working space, equipment, or capital. Understanding precisely what your business uses is critical in order to ensure that you are making the most of the resources available, and not missing any holes in your business model.
Types of Resources
A business’s resources can be broken down into several different kinds. Some of the most commonly used include:
- Labor: Almost every business requires human labor to get through a workday. Labor includes all of the people who work for you, and the jobs that they do.
- Management: Without a guiding hand, many businesses would end up achieving very little. This is why managerial skills and execution are an essential resource for many companies.
- Expertise: In order to really help a business excel, labor and management need to be executed with expertise. Knowledge of your domain and the practices that help you succeed is crucial.
- Equipment: Most businesses require specialized tools to do their work, whether it’s special hardware, a unique piece of software, or a machine designed to do a certain task.
- Finances: A company’s finances enable it to use many of its other resources. This can include: the payment of wages, the purchase of equipment, or the renting of a workspace.
- Energy: In the 21st century, it’s difficult to run a business without tapping into energy, whether it comes in the form of gasoline to power a fleet of trucks, or electricity to keep an office full of computers up and running.
- Land: Land is exceptional as a resource insofar as it does not need to be produced. Instead, it can be refined to suit a particular business’s needs.
- Time: Since no business can achieve its ends instantaneously, every business needs to treat time as a resource. Since the cost of time is measured in terms of another resource, time often needs to be considered alongside resources such as labor, energy, and land.
These are just some of resources that many businesses use every day; this is not an exhaustive list of resources, since every business has its own unique needs. When thinking about the resources that your own business uses, try to consider the things that it needs to keep going, both on a day-to-day scale and in the long term.
What Is Resource Management?
The resources that a business uses can be broken down into various types. Resource management is the process of allocating resources in order for a company to complete its work in the most efficient way possible. This process is often done by people with training in project management who have the expertise and background to make these kinds of judgments calls on behalf of a business.
As business manager or owner, it’s up to you to decide how to best utilize the resources you have available, figure out what additional resources you might need, and determine where resources are being wasted in your business model. Resource management is a necessity for any business that wants to remain competitive with its rivals.
Resource Management Key Terms
Some key terms often used in discussions of resource management include:
- Cross-Functional Resource Allocation: The process of allocating resources across different functional teams within an organization, where each team is focused on the same ultimate goal.
- Functional Resource Allocation: The process of allocating resources within a single functional team.
- Functional Team: A team that aims to satisfy a single project function. Some examples of different functional teams within the same organization might include the writing team, the editing team, and the publishing team.
- Organizational Management: The process of managing and allocating the resources with in organization.
- Resource Allocation: The process of assigning resources to tasks and projects with the goal of distributing them efficiently.
- Resource Assignment Matrix: A term associated with the management of human resources. People in a resource assignment matrix are determined to have a certain relationship with a given task, whether it’s being responsible, being accountable, being consulted, or being informed.
- Resource Plan: A comprehensive plan of all of the resources needed to complete a certain task.
- Resource Breakdown Structure: Within a resource plan, the resource breakdown structure determines the hierarchy among resources, especially human resources.
- Resource Dependency: The phenomenon wherein an organization relies too much on a single resource, creating a bottleneck for all of its projects. For example, if you have four software licenses, but eight departments that need their own license, you’ve got a problem with resource dependency.
- Resource Histogram: A visual representation of all of the resources involved in a project and their relationships with one another.
- Resource Over-allocation: A resource that is associated with too many tasks. For example, an overworked employee.
- Strategic Planning: An organizational management activity involving the setting of priority, allocation of resources, and establishment of common goals.
- Utilization Rate: The rate at which a resource is utilized. Often used in regard to an employee’s time and how much of it they spend on a given task compared to the total amount allocated.
Benefits of Resource Management
Good resource management can enable a business to excel in its domain. Some of the benefits of managing resources efficiently include:
- Fewer workplace conflicts. When company resources are managed well, teams and individuals can feel like they have what they need more often. When they have what they need, there may be fewer conflicts in the workplace over limited resources. A solid resource breakdown structure also creates the mechanism for conflict resolution within the company, by identifying where resources and needs stand with regard to one another throughout the organization.
- Lower overhead costs. Good resource management involves allocating resources efficiently. When this is done right, there’s less need for project micromanagement. If you allocate resources well within your business, you can save money on your administrative costs in the long run.
- Greater productivity. Great efficiency in your resource management extends to all areas of your business. If you’re more efficient in how you’re distributing your company’s resources, your whole business will be able to operate more efficiently. That means getting projects done quickly and with fewer resources overall.
- Better profits. When you can do your work with lower overhead costs and your teams are more productive within a given timeframe, you will have the potential to improve your company’s profits.
- Improve quality in projects and products. Remember that expertise is a resource as well. By ensuring that your business has plenty of expertise, you can also ensure that you are able to deliver the kinds of high quality products that catch the eyes of clients.
- Reduced burnout rates. Smart resource management can help you get plenty of high quality work from your employees without pushing them too far. When employees don’t suffer burnout, it’s easier to keep them around, developing expertise through experience.
Ultimately, businesses that practice good resource management are able to produce higher quality work more quickly and with less overhead. It’s clear that every business should take a serious look at its own practices to find the most efficient systems of resource allocation.
Challenges of Resource Management
Resource management can be a boon for your business, but that doesn’t mean that it will come easy. Effective resource management can be difficult for a few reasons:
- Surprises in the workflow. No two projects are the same, so no two projects can work with exactly the same plan. Good resource management is sometimes made difficult by unexpected developments in a project, which managers will have to adapt to in order to ensure that functional teams continue to operate efficiently.
- Managing human resources. People make up a large number of a given company’s resources, including labor, expertise, and management. However, people are complicated and don’t all work the same way. In addition, people can suffer from burnout if they become the victims of resource over-allocation. Good resource managers need to understand the strengths and weaknesses of their employees in order to allocate them efficiently, and without overworking them.
- Not enough resources. At the end of the day, resources are finite. One of the greatest challenges of resource management is finding out where to put limited resources when you don’t have enough to do everything at once.
Good resource management can have a huge payoff for your company, but it can also be very difficult to do reliably. People who are trained in performance improvement are better situated to identify and address inefficiencies within a company’s resource management plan.
Resource Management Strategies and Techniques
Resource management comes with some challenges, but there are also techniques and strategies that can help you overcome these difficulties and lead you towards efficient resource allocation. For business owners and managers who feel uncertain about how to wield resource management strategies, pursuing an MBA can help you learn how to effectively utilize these strategies and know which technique is best-suited to your situation.
Resource management, as a term, refers to the overall idea of making informed decisions about where to place resources in order for your business model to run efficiently. Resource planning, however, refers to a particular strategy that can make your resource management more effective.
Resource planning involves identifying every resource that will need to be used in order to complete a project. As a strategy, resource planning is often done best when you listen to the input of employees. Speak to the people who are going to do the work on your project and find out exactly what they need to succeed. By doing this before beginning on a project, you can make sure that your teams have everything that they will need before work begins. This may cut down on hiccups in project execution and help your teams become more efficient.
Unexpected events that crop up during a project’s execution are some of the most serious challenges associated with resource management. However, by tallying possible risks before a project begins, considering the likelihood of each individual risk, and developing a risk management plan, it’s possible to smooth out some of the bumps that surprises may cause.
Consider some of the risks that companies often face in their day-to-day operations. These might include things like:
- A power outage in the office;
- Employees calling in sick;
- Missed project deadlines;
- Associated companies going out of business;
- Human error.
Risk management involves identifying the kinds of risks that a project may face and allowing for flexible resource allocation as needed, in order to stop these risks from derailing a project entirely.
Estimating and Forecasting
Efficient resource allocation often requires that managers and owners understand exactly how much of a given resource a project will need. However, this kind of knowledge is only available after the project has been completed.
This is where estimating and forecasting come in. Accurate estimates of the resource demands of a particular project or task can help a company to inform its resource management strategy. Estimates are rarely going to be 100% accurate. However, by evaluating past estimates against actual resource requirements, and asking employees to document their resource usage thoroughly, it’s possible to hone your forecasting process and understand your resource needs more clearly.
Resource leveling, also known as resource smoothing, is the process of reallocating resources to avoid underutilization and prevent burnout. For example, if one team is finishing its project ahead of schedule, while another is lagging behind and becoming stressed, resource leveling would involve shifting some of the underworked team’s labor over to the delayed project. By doing this, you could ensure that your labor is being used efficiently while avoiding resource-overallocation.
Agile Project Management
As we noted above, perfect resource allocation forecasts are extremely rare, if not impossible. However, agile project management can help to mitigate the effects of imperfections in the forecasting process. Agile project management involves approaching a project with a broad vision, rather than a single, well-defined goal. Instead of laying out a rigid project plan, agile project management requires making small course corrections along the way. The end result is that teams that operate under agile project management are able to adapt to changing conditions and handle surprises without being tied to a fixed resource allocation from the beginning.
List of Resource Management Tools
If you are a business owner or manager, resource management is not something that you have to do alone. There are a wide variety of tools that can help you to allocate resources more efficiently. Additionally, while having tools is helpful, a degree in business intelligence can further equip you with the experience, training, and skills that you need to make the informed resource allocation decisions. Nevertheless, below are a few popular resource management tools to help you keep projects running smoothly:
- 10,000 ft — 10,000 ft is a piece of software with resource management features. It’s especially useful for helping managers to allocate the right skills for a given task. It includes time tracking and expense tracking for individual projects, allowing managers to track past resource needs and plan for more efficient resource allocation in the future.
- Asana — Asana is a popular calendar app that can help you assign and track tasks for your employees. Tasks can be sorted into specific projects, passed between employees and teams, and given custom tags depending on their status. Asana can help make allocation easier, as managers create and assign tasks to employees, while progress is visible throughout the life of a task.
- Epicflow — Epicflow is intended to help managers allocate resources more effectively. It is most noteworthy for integrating resource management across a number of different projects, all drawing from the same resource pool. It can also automatically calculate task priority, assigning resources efficiently to the tasks that have the greatest need.
- Teamdeck — Teamdeck is a useful piece of software for managing your human resources. Its features include schedule, time tracking, and leave management, all within the same view, which can allow you to make informed decisions about how you allocate your labor.